Price! MSC ignites price war with Maersk! MSC lowered FAK rates on Asia-Europe routes

MSC recently announced that it will reduce the FAK rate on the Asia-Nordic route, reducing the freight rate by about $200 per 40-foot container, triggering a price war with 2M alliance partner Maersk.

From August 15, the new freight rate for the route is $947 per 20-foot container and $1,694 per 40-foot container. In contrast, Masky announced on July 3 that it would raise the FAK rate to $1,025 per 20 feet and $1,900 per 40 feet effective July 31.

In addition, other shipping companies are also trying to raise freight rates on the Asia-Europe route. For example, CMA CGM announced that it will increase the FAK rate to $1,150 per 20 feet and $2,100 per 40 feet effective August 15.

The cancellation of MSC's standalone Asian-Nordic "Swan" service last week signaled the company's need to support its aggressive growth aspirations with discounted rates, particularly for its standalone services.

Spot rates for containers from Asia to Northern Europe initially surged last week due to the widespread implementation of carrier GRI on August 1, with Drewry's World Container Freight Index WCI soaring 25% to $1,620 per 40 feet; Shanghai Shipping Exchange SCFI rose $233, or 31.40%, to $975/TEU in a single week, and Ningbo Shipping Exchange NCFI rose 56.9% in a single week.

The manager of an NVOCC in the UK recently revealed that major carriers said that the minimum FAK rate may have some flexibility. "Considering that there is no so-called peak season this year, shipping companies may not be able to stick to GRI prices, and will only be happy to get a certain percentage of profits from these substantial increases in freight rates." If they're lucky, they could end up close to MSC's GRI and lose market share to ships unless Maersk retreats somewhat in terms of price increases. ”

Still, Maersk CEO Ko Wensheng made clear on the company's second-quarter earnings call on Friday that market share is not a top priority for the container shipping division. Maersk's liner shipping volume in the second quarter fell by 6.1% compared to the same period last year, however, CMA CGM, which challenged Maersk's top ranking, achieved steady growth above the industry average in the quarter.

Meanwhile, just before 2M fell apart, MSC had just announced its participation in the SEA-LNG Alliance to support cross-industry collaboration on fossil-based LNG as a fuel for the transition to net-zero emissions; Maersk's refusal to adopt this strategy further exacerbated the differences between MSC and Maersk.